This is merely a sub-set of eWallets in existance, and not necessarily the best eWallets out there, just the ones that have been tested and confirmed to be actually eWallets by MoneyTransferComparison.com.
Are eWallets good for international payments? What are the exchange fees?
Out of the dozens of eWallet websites and apps, which one is right for you? Do you actually need an eWallet if your main thing transfer money abroad? We look at eWallets from across the web with a particular focus on the larger ewallets like Paypal or Skrill with a hyper-focus on their exchange rates for international payments. View our specific review of PayPal’s international payments here.
If your purpose is to transfer money digitally to another person, and you are trying to circumvent the bank to avoid hefty fees and lengthy process then you should consider the best international money transfer companies – companies like the world-renowned Wise will allow you to fund transfers through debit/credit card or a domestic bank transfer to a third party account. In other words you don’t necessarily need an eWallet. These options are far cheaper than eWallets for international transfers and payments and similarly to an eWallet allow you to maintain a balance online.
What Types of E-Wallets Do Exist?
Out in the wild, different types of e-wallets contrast in composition and functionalities. Following our initial definition, we can distinguish those wallets by their software and devices they run on. With regards to data: We will see that most e-wallets process similar data sets.
Basically, we can identify 4 basic types of electronic wallets: Digital Wallets, Crypto Wallets, Mobile Wallets and IoT Wallets. All of them act as umbrella terms for very specific wallet configurations, which may vary according to a number of criteria.
Of course, the classifications below will sometimes overlap. Specific e-wallets can comprise functions from more than one of the categories presented here. For example, there are wallets which function as NFC payment apps at points-of-sale and also as payment instruments for e-commerce platforms.
Different types of e-wallets store and process different types of data or assets.
1. Digital Wallets / E-Money Wallets
This type of e-wallet is regarded as the “standard” use case. That’s why many use the terms e-wallet and digital wallet synonymously. For our purposes though, we want to present digital wallets or online wallets as a subcategory, to better differentiate them from electronic wallets as a basic concept. Following our definition, digital wallets are typically web applications that can be accessed from any device that’s able to connect to the internet.
Digital wallets are part of a central web platform, run by the wallet provider. There, users can top up or withdraw from their e-money balance using payment instruments stored in the e-wallet. In addition, they can pay for e-commerce purchases either using available e-money or by charging a stored payment instrument. Popular examples are PayPal or Amazon Pay.
Finally, certain digital wallets store assets other than fiat currencies. Take loyalty points or even strictly informational data like coupons or discount codes, for example. Many such stored values only circulate within a closed loop, so the values can only be spent in certain contexts, like on specific e-commerce platforms.
At trimplement, our expertise lies with digital wallets as defined in this paragraph. It’s this use case that we will go into more detail on below. This will help you when deciding on which e-wallet you want to integrate into your services or e-commerce platform. It should seamlessly integrate into your software landscape. The good thing is that custom-tailored e-wallets based on a flexible software foundation are always an option.
2. Crypto Wallets
This specific form of an e-wallet stores public and private keys of a user. The keys act as certificates of ownership for cryptocurrencies, which are stored on the blockchain. To provide additional safety, so-called hardware wallets or cold wallets exist. They operate offline, typically on a USB stick.
3. Mobile Wallets
The term “mobile wallet” is often used to refer to very different wallet applications. We also see “e-wallet”, “digital wallet” and “mobile wallet” getting thrown around as synonyms. This is not wrong as mobile wallets indeed enable digital payment, but it falls short.
As a basic functionality,mobile wallet solutions hold credit and debit card data and can be used for payment. The card data is stored on the special chip of the mobile device called secure element. The cards can exist as traditional plastic cards outside the wallet, too. Users can simply pay with their mobile wallets at points-of-sale. For this purpose, the POS interacts with the secure element of the mobile phone via Near-field Communication Technology (or in the case of older POS systems Magnetic Secure Transmission Technology).
Certain mobile wallets are able to execute payments at a point-of-sale without an internet connection. The wallet can check offline if the user has enough funds left to conduct the payment (e.g. via reading the last known prepaid balance) or it can fully skip the check, depending on the payment amount and risk scoring of the user. Once the wallet is online again, it syncs available funds and if there is not enough prepaid balance, it can e.g. automatically trigger a payment via the user’s preferred payment instrument to collect the outstanding payment amount.
4. IoT-Based Wallets
Among the more recent variations of e-wallets count those interacting with Internet of Things technology. Those wallets sure vary: Some operate with e-money, others with virtual currencies. Some are installed in wearables such as watches, wristbands or jackets, others run on stationary wallet-enabled devices, like on your smart fridge or your smart car’s computer.
How Digital Wallets Operate Payments
Executing payments, that is what most electronic wallets are basically there to do. B2C payments, especially on e-commerce platforms, likely present the largest field of application for e-wallets in the Western World, with mobile transactions at point-of-sales being a close second.
Yet, those are special use cases. In the paragraphs below, we will look at how electronic wallets generally process payments. Doing so, we will devote ourselves to the use case of e-money-processing digital wallets specifically. Following our earlier definition, we will describe this use case along the lines of data, software and hardware.
Data Processing in E-Wallets
Data Processing is a crucial aspect for payment processing in e-wallet environments. Financial authorities place great emphasis on data security, which forces e-wallet providers to comply with various data-related regulations. Moreover, data is not only a source of challenges for companies, but also can act as a valuable resource for offering customers the best user experience.
What Types of Data Do E-wallets Hold?
In digital transactions, everything is data, so to speak. And even before a transaction can take place, e-wallet providers already inquire data from their users. For the purposes of e-wallets, we can identify two types of data. They are subject to different regulations and processes running within an e-wallet.
This category includes a broad variety of data items which usually don’t have direct monetary value. What exact data an e-wallet must store is subject to regulations in specific countries and the use case in question, but will likely include the following types of data:
The vast majority of e-wallets hold the data sets to some degree – and it’s necessary they do, as we will see below in our compliance and security section. Payment service providers or acquirers require some of this data to execute a payment transaction.
This category refers to all data which represents monetary value. The most obvious candidate would be e-money. E-wallets, as the name suggests, can store it and use it to conduct digital payments – that is, if the wallet provider has acquired an e-money license to lawfully do so.
When you have data, you can analyze it – often to great effect for digital goods and service providers. In their role as databases, payment e-wallets are tracking a user’s payment history. In fact, financial regulations even require e-wallet companies to store payment history data over an extensive period of time. Thus the system can substantiate every transaction to the user for years in hindsight.
Yet, the analysis of historical payment transactions also presents an opportunity for companies. If the data protection regulations allow it, they can query the data. This enables them to draw conclusions about purchasing behaviour of users. On the other hand, payment history tracking is an advantage for users who want to assess their spendings.
Compliance and Security in E-Wallet Payments
Online payments by default have an anonymous quality. Thus, users must provide their personal data when registering and setting up the wallet to identify themselves. Accordingly, this data – and also other data processed by e-wallets such as payment history recordings – deserves the label sensitive data. That means that data like this could be used to commit fraud when accessed by criminal third parties.
And not only the user is in danger of criminal activity using data stored within the wallet. The e-wallet service provider is, too: What if the user is lying about their identity or does possess unsound motifs?
There we enter the realm of Know-Your-Customer, Anti-Money Laundering and Counter-Terrorist Financing procedures. Any e-wallet service provider must feature a tightly-knit assembly of security, risk evaluation and fraud prevention, complying with the regional KYC, AML and CTF regulations. Local financial authorities pass and enforce such regulations. That means that e-wallet companies operating across borders may have various sets of rules in place for the same service, determined by the country or region. In most jurisdictions, e-wallet providers must at least undertake a number of measures.
- Customer Due Diligence: E-wallet providers run CDD checks to verify a user’s name, addresses, birth date etc. Users who might pose a higher risk are subject to Enhanced Due Diligence (EDD). Depending on the user verification level different limits apply to payment transactions and other activities.
- Transaction Monitoring: E-wallet providers scan transactions for unusual volumes and frequencies, assembling Suspicious Activity Reports (SARs) to pass on to financial supervisory authorities.
- PCI DSS: When handling credit card information, e-wallet companies have to adhere to the Payment Card Industry Data Security Standard (PCI DSS). It’s an internationally applied security standard for major card schemes.
- Strong Customer Authentication: This includes procedures such as two-factor authentication to verify the user’s evidence accurately and prevent fraud.
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